Sustained investment crucial to security of UK gas supply

Jul 11, 2004 02:00 AM

Sustained investment in current and new gas fields will ensure that domestic gas supplies will continue to meet at
least 60 % of the United Kingdom’s (UK’s) demands in 2010. Malcolm Webb, CEO of the UK Offshore Operators
Association (UKOOA), the representative organisation for UK oil and gas producers, has responded to the House of
Lords European Union Committee's report, “Gas: Liberalised Markets and Security of Supply”.
"The UK is the world's fourth largest producer of gas, supplying 102 bn cm of gas from its offshore fields in 2003,"
says Webb. "Gas production from the UK continental shelf (UKCS) peaked in 2000 and is now slowly declining by around
2 % per annum, with the UK expected to become a net importer of gas at some point between 2005 and 2006. Diversity of
supply, at competitive prices, is fundamental to achieving security of supply, with open markets essential to
reaching this goal. Maximising recovery of the reserves from the UKCS should be at the heart of UK energy policy as
this will prolong self-sufficiency and sustain security."

He states that UK gas producers are currently investing around £ 2 bn per annum in new gas developments on the
UKCS out of a total annual investment of some £ 4 bn. However, Webb emphasises that Government too has an
important role to play in helping producing countries create the right economic and legal climate to encourage
long-term investment in energy supplies, whether in the UK or overseas.
"Infrastructure investment is a crucial issue, both internationally and in the UK, where expansion of storage is
going to be increasingly important in balancing supply with demand, especially at peak times. In any event, security
of supply comes at a cost but the risks of under-investment in infrastructure far outweigh the costs of some extra
investment."

With this in mind, the UKOOA has welcomed Government’s initiatives regarding the Exploration Expenditure
Supplement and how it will implemented in the North Sea, and is pleased that this measure has beenbackdated to the
start of the year.
“This measure is specifically targeted at new entrants to encourage them to carry out exploration in the North
Sea," explains Steve Harris, UKOOA’s Acting Director General. "We hope it will have some impact, when
exploration and appraisal activity in the UK continental shelf has slumped significantly in recent years."

However, the UKOOA stresses that Government must not take its eyes off the bigger picture. The Association believes
that there is a much larger prize to be won, with some 10-20 bn barrels of oil equivalent still to be explored,
appraised and developed. It states that more action is required, and Government needs to work with Industry to crack
the considerable remaining potential of the North Sea.
The offshore oil and gas industry is committed to continuing its talks with Government about further possible joint
measures (both fiscal and non-fiscal) that will help to enhance the competitiveness of its activities on the UK
Continental Shelf, and targetthe recovery of remaining oil and gas reserves.

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